Agile FINANCIAL TIMES

July
2009

Financial Inclusion
Trends in Africa, South East Asia and India

CUSTOMER SPOTLIGHT
Repco Foundation

PERSPECTIVE

Business Agility Through

Central Processing
Services

SOLUTION SPOTLIGHT

Agilis Universal Micro-Finance Solution

 July 2009

Editor’s Note
Greetings!
CONTENTS
Thank you for the enthusiastic response to our
last issue where we talked about ‘inclusion’ of
Micro-Finance software to our solutions stack. CUSTOMER SPOTLIGHT
Responding to requests to hear more on this,
Repco Foundation 4
we have made ‘Financial Inclusion’ our cover
story for you along with Micro-Finance case COVER STORY
studies and solution highlights!
Financial Inclusion 7
A special contribution this month is from our CEO, Kalpesh Desai,
PERSPECTIVE
thanks to repeated requests to hear from him. We have been featured
in many publications and are now known for our thought leadership in Business Agility Through
the BFSI sector. Kalpesh is much heard and read about in forums and Central Processing
media world-wide and our readers asked why not in our own Agile
Services 11
Financial Times. So here it is, in this issue.
NEWS

Having personally spear-headed many successful initiatives in the Global Update 14

BPO/shared services and central processing space, Kalpesh shares his
‘Perspective’ on the many benefits of setting up and outsourcing a SOLUTION SPOTLIGHT
shared back-office to leverage economies of scale. It’s a win-win like no Agilis UMFS 16
other.

Please continue to send in your feedback on what you would like us to

cover in forthcoming issues. We promise the ‘inclusion’ of your wish as
our command!

Be Agile!

Shefali Khera
Chief Marketing Officer
Write to us at info@agile-ft.com

Agile FT recently acquired the
Universal Micro-Finance
Solution from Theme
Technologies, which is now
called Agilis UMFS. Agile FT
has plans to offer this as a
software platform as well as an
outsourced service to micro-
finance institutions in emerging
markets. This case study
highlights the implementation of
Agilis UMFS at Repco
Foundation, which is a
subsidiary of Repco Bank.
4
CUSTOMER SPOTLIGHT
Repco Foundation
Making a Difference
Repco Foundation for Micro Credit (RFMC) is a NGO
promoted by Repco Bank, a Government of India
enterprise. RFMC is a ‘not for profit’ entity registered as a
Section 25 company. Its primary business is to extend
support to Self-Help Groups (SHG) that are financed by
Repco Bank, with a view to increasing the income level and
eventually improving the standard of living of its members.
Repco Bank floated RFMC as the services offered by other
NGOs operating in Repco’s target geography were not
satisfactory and left much to be desired especially in terms
of creating awareness and imparting skills amongst the
target groups. This is a unique model, which is the first of its
kind to be implemented in India, under which SHGs are
referred to Repco Bank by RFMC for extending credit
facility. RFMC also monitors and engages in capacity
building activities of the beneficiaries, as a result of which
their credit absorption capacity is expected to increase in the
long term.
About the Foundation
RFMC is committed to the development of SHGs by
extending micro credit to reduce poverty and for
empowering the poor to become self-sufficient. To this end,
it aspires to evolve into a preferred micro-finance institution
(MFI) in bringing about a perceptible change in the lives of
the poor through formation of SHGs.
With more than 17,000 SHGs under its wing, to whom more
than INR 100 crores credit has already been extended,
RFMC is well on the way to success. RFMC currently has 57
branches, which are likely to increase to 75 in the next couple
of years. A key characteristic of the micro-credit business is
the high recovery rate which is a result of group-based
 CUSTOMER SPOTLIGHT

lending, and RFMC enjoys a recovery rate of 99.75%. RFMC is aggressively

pushing its services through the concept of ‘branchless banking’, via which it
takes banking services directly to the customer through hand-held devices and
mobile vans. In a country as vast as India, having a growing population with
growing needs for banking services, RFMC is convinced that it will be able to
address this demand quickly and in a cost-effective manner only by ‘taking the
bank to the customer’, especially as in the micro-credit segment the large
majority of customers may not even have the money to travel to the branch.
Future plans include providing other services such as life and health insurance
to all members of its community. RFMC has already formed a partnership with
Life Insurance Corporation of India (LIC), as well as EXIM Bank for
providing trade finance for exports, in addition to a tie-up with the National
Housing Board (NHB) to provide better housing for its community members.

RFMC has pro-actively embraced technology to drive its expansion plans, and
considers technology to be the singular catalyst to achieve its business goals.

Project Background

RFMC started operations two years ago, and in its endeavor to become an
efficient and leading provider of micro-credit to the masses, it took a strategic
decision to leverage technology to the utmost. In the world of micro-finance
the ticket size of transactions is typically low, and this makes it even more
critical for processes to be automated. This automation is required not only to
increase the quantity and quality of services to the customer, but also to a large
extent to reduce operational risk, including the possibility of fraud, by putting
in place robust customer identification and authentication procedures.

Each SHG has a group leader who is responsible for ten to twelve people in
that group. The group leader is given a smart card that can be swiped in a hand-
held card reader carried by RFMC staff who collect or disburse money to
individual members in the group, and the data is immediately updated in the
core banking system to reflect the account accurately and in real-time.
"We believe that
Supplier Selection
Theme
RFMC chose Theme Technologies as its technology partner to automate the
entire micro-finance business, as the supplier had already proven its credentials Technologies is
by being a trusted technology partner to the parent bank for the last few years
for its core banking initiative. poised to
"Our future vision is to extend enablement services to Self-Help Groups continue their
(SHG), with multiple products offered to individual SHG members, based on
their repayment capability. We have established 12 training centers across our partnership with
target geographies to train SHG members on smart card technology. In these
centres, smart card technology is introduced to enable cash transactions. us to enable us to
Theme Technologies is acting as a technology partner to support our vision and
scale alongwith us. Our plan is to reduce pressure on the brick-and-mortar achieve our
branches and to provide a superior service through mobile branchless banking.
We are also planning to implement business correspondent services with a business goals.”
number of banks. We believe that Theme Technologies is poised to continue
their partnership with us to enable us to achieve our business goals" says G.
Manickasundaram, Project Director, RFMC.
- G. Manickasundaram
"Theme Technologies has a very good understanding of the pulse of our
foundation and our specific requirements, especially as it earlier developed our Project Director
bank’s core banking system. The delivery people in Theme are very dedicated,
have good domain and technology knowledge, and are focused on helping us RFMC
5

achieve our goals. In addition to significant cost savings due
to mobile branchless banking, the implementation of UMFS
has significantly reduced the possibility of identity fraud,
and has also enabled the IT department to provide top
management with an accurate and comprehensive view of
operations in real-time," says R. Rajagopal, General Manager
- IT, Repco Bank.
RFMC had also considered other offerings from other
industry players, but felt that Theme’s technology would be
able to quickly adapt to changing requirements and the
partnership would provide a high level of commitment to
RFMC, as opposed to its larger counterparts.
Technology
Agilis Universal Micro-finance Solution (UMFS) is a user
friendly and web-based financial platform designed
specifically for micro-finance institutions. It includes group
and individual customer information management, shares
and savings management, loans and deposits, transaction
processing and financial accounting. UMFS is built on a
component-based architecture that allows RFMC the
flexibility to change the functionality and workflow
dynamically. This is especially critical in micro-finance as a
number of practical problems that come up in the field can
be worked around without compromising the integrity of
the system and processes.
The work-flow based portfolio management system present
in UMFS allows RFMC to manage the complete cycle of
solidarity group and individual lending portfolios for
origination, disbursement, collection and recovery. The core
transaction processing module handles the data capture of
all debit and credit transactions and it automatically
maintains general ledger entries based on user defined
parameters. The built-in report generator produces all
R Rajagopal, Repco Bank
6
CUSTOMER SPOTLIGHT
standard operational reports as well as statutory reports. A
key feature is the intuitive front-end that is integrated online
to a mobile branch hand-held device with a smart card
reader, which makes it a powerful solution for use in
geographically-dispersed and remote field operations.
Through this hand-held device, RFMC is able to perform all
lending and deposit activities, including generation of
receipts and statements for individual customers.
The success of the micro-
credit venture is spurring the
foundation on to provide
more third-party services to
its large customer base
which will generate
substantial fee income.
Business Benefits
The solution offered to RFMC meets the requirements of
the micro-finance industry. It supports RFMC’s vision of
introducing branchless banking across three states to service
17,000 SHGs. It allows RFMC to build a high level of
confidence with its customers by enabling the field staff to
provide e-statements at the group and individual level. Since
the data is relayed on real-time basis to the central server,
there is absolutely no data redundancy and the foundation
has real-time visibility of its field activities. Due to the multi-
level authentication mechanism built into the process, the
likelihood of fraud by individual customers is minimal, and
this has helped its recovery percentage to a large extent.
"Without this solution, we would not have been able to
automate the micro-finance business," says R. Rajagopal,
General Manager - IT, Repco Bank.
Conclusion
RFMC has gained a significant competitive edge over other
MFIs by virtue of using UMFS. The success of the micro-
credit venture is spurring the foundation on to provide more
third-party services to its large customer base which will
generate substantial fee income. Being one of the early
movers in facilitating micro-finance in a quick and
transparent manner has given RFMC a substantial
advantage over its competition, and more importantly has
helped it to serve the less privileged and make a difference
by uplifting the lives and future of thousands of people
living on the edge of poverty.
 The majority of developing
countries find it challenging to
provide basic amenities to their
citizens. Poverty is
Financial
predominant, with millions
earning less than US$ 2 per
day. The usual issues of lack of
Inclusion
food, medicine, housing,
education, and security have Trends in Africa, South East Asia and India
been on the radar of various
governments and other In the last five years, one issue that has generated a lot of interest is provision of
charitable organizations for a banking and insurance services for the poor. These facilities are inherently
long time now. important to the well-being of any community, and will eventually also help
address and alleviate some of the root causes of poverty.

The provision of financial services to the economically disadvantaged segment

of the population has now matured and is manifested in most development
schemes. The United Nations (UN) is a keen participant as it hopes to replicate
effective initiatives across countries to reach the poorer sections of the society.
The UN efforts were published in its ‘Blue Book’, to analyze impediments and
initiatives to achieving financial inclusion in different geographies.

The most common form of access to banking is opening a no-frills savings

account. With increasing emphasis on financial inclusion, other schemes such as
collateral-free micro-credit and micro-insurance are now gaining ground. Savings,
deposits and credit are being given equal importance to develop an all inclusive
and balanced strategy. Initial experiments and pilots in micro-finance reported
success with high levels of responsibility among beneficiaries.

While the reason that micro-finance institutions (MFI) originally started business
was to address the unorganized money-lending business, the overall intention
was to empower the poor. Micro-Finance enables this segment to get out of their

7

debt traps from local money lenders by providing credit for
income generating activities, and, in addition, provides
services that allow a safety net for their families, such as
micro-insurance. This market segment also offers a
tremendous return on investment if the business is carried
out professionally, as the percentage of defaults from this
community is miniscule, a fact that is attributed largely to the
group-based lending practice where peer pressure to pay
back is high.
Africa: Tackling Natural and Man Made Adversities
Some African countries face harsh natural conditions, while,
some others have endured wars and been strife-ridden for
decades. With governments concentrating more on wars and
internal conflicts, the welfare of citizens has hitherto been
fairly low on the agenda. However changes are now visible
with more schemes tailored to suit the needs of various
countries in the region.
Some African countries depend largely upon international
organizations such as the UN, the Red Cross and other
organizations for aid. Non-government and not-for-profit
organizations drive most of the welfare initiatives. A number
of micro-finance institutions (MFI) operate in the region.
The schemes are suitably flexible to adapt to diverse
requirements demanded by the region and take into
consideration the need to pool group resources and leverage
tradition.
The Consultative Group to
Assist the Poor and the Bill &
Melinda Gates Foundation
launched a US$ 26 million
technology and micro-finance
initiative to test mobile banking,
ATMs, card readers and other
technologies underlining the
importance of technology.
Micro-finance initiatives that have worked well have been
expanded to include other socially- related issues, such as
schooling. An example of this is Yum, also referred to as
Group of Common Initiative of the Women Farmers of
Bogso (GICPAB), which started with efforts to improve
cassava produce, process, transportation and marketing.
8
COVER STORY
Members worked together and the collaborative efforts
saved time and reduced costs. This initiative then expanded
with loans to those who registered their children or
grandchildren in schools, for books, meals and fees.
The use of traditional banking practices and the associated
transactional costs have hampered the growth of micro-
finance services in remote areas and villages. The
implementation of the relevant technology to enable
‘branchless banking’ will speed up the process and enable
access without having to establish branches. Training
members from within the group to handle technology will
enhance community involvement and increase
independence of these groups. The Consultative Group to
Assist the Poor (CGAP), an independent institution housed
at the World Bank, and the Bill & Melinda Gates Foundation
launched a US$ 26 million technology and micro-finance
initiative to test mobile banking, ATMs, card readers and
other technologies underlining the importance of
technology to deliver micro-finance.
Micro-finance must gradually expand to include micro-
enterprise. Encouraging small-scale entrepreneurs will help
in poverty eradication, and also reduce the number of rural
poor moving to urban areas in search of employment. A
visible line of scalability allows beneficiaries more options to
move ahead.
Banking and insurance services need a push to increase
confidence in efficacy of these initiatives and change habits
of people. Individual savings are low, directly affecting
capital accumulation, which in turn affects the overall
growth rate. Saving and investing will increase financial
viability, participation, and provide for other benefits such as
better education and housing.
South East Asia: Success Depends on Stability
Financial inclusion in South East Asia went through a phase
of non-acceptance and doubt. However, persistent efforts,
 COVER STORY
performance, and due importance and schemes by
governments has made it one of the priorities for policy
makers. Though conditions across South East Asia differ,
and not all countries boast of successful ventures,
experiments continue to try and formulate workable
options.
With increase in acceptance levels for micro-finance, it has
moved beyond traditional NGOs to soliciting investments
from regulated financial institutions. Micro-finance
investment vehicles are tools to leverage foreign capital
investment in MFIs. To maximize the reach of financial
inclusion, innovations in delivery models and use of
technology is on the rise.
To cite an example, Cambodia has launched a mobile
banking initiative called WING, which is a mobile-enabled
payment service that allows customers and businesses to
transfer, deposit and withdraw money using cell phones at a
low cost. WING has more than 150 points of
representation in Cambodia, with representation in 16 of
the 24 provinces. WING customers comprise garment
workers and other rural customers who have traveled to
urban centers for work. The payment service offered by
WING allows them to transfer money using a safe,
affordable and fast transaction system.
Governments have contributed by making policy
environment conducive to development of micro-finance.
For instance when the Government of Malaysia identified
agriculture and agro-based sectors as the key growth areas in
the Ninth Malaysia Plan, Bank Pertanian, a specialized
financial institution for the agriculture sector, underwent
restructuring and strategic changes to enable greater access
to easy financing for the identified sector, followed by
venture capital funding. The idea was to ensure that the
entire value chain in the agriculture sector receives benefits.
With innovations in technology, illiterate people have been
able to gain access to the advantages of micro-finance. In
Indonesia, PT Bank Danamon used biometric
authentication leading to a paperless environment and
eventually lower costs. Fingerprints were scanned for
verification replacing the manually filled forms, making the
process easier for first-time users or the illiterate, to engage
in banking transactions.
The financial inclusion initiative in SE Asia needs to develop
into a self reliant mechanism. To develop this, emphasis on
savings, and strict credit disciple need to be implemented.
Greater stress on group initiatives, which have proved
successful in other locations, will help.
SE Asia suffers many natural calamities, due to which
financial inclusion for poor people must accommodate
micro-insurance. Low income groups are especially
vulnerable to the loss of an earning member, therefore it is
extremely important for them to have a scheme devised
keeping their risks in mind. A unique scheme based on
community responsibility when an earning member of a
family passes away has been used successfully in the
Philippines. CARD’s Mutual Benefit Association uses the
practice of Damayan - a local custom in the Philippine rural
areas where members of community and relatives donate
cash to a family that has lost a member. The practice is
mutual as death in any family would be followed by a similar
custom. CARD used local information, informal monitoring
and enforcement system to develop a cluster of client-
members with the vision that they would co-own an
insurance company. Almost 98% of CARD clients are poor
women. This format took care of high transaction costs, the
perception of lack of capacity to afford regular insurance
premiums and credit-worthiness. This scheme was further
regularized using certain mandates to ensure maximum
benefits.
India: Innovating in the Face of Diversity
India has the second highest number of people in the world
without access to banking services. However it is the
diversity of needs that is even more overwhelming. The
financially excluded populace of India resides in urban and
rural India and each segment has unique characteristics that
need to be addressed.
To promote financial
inclusion, public sector
banks are required by the
government to dedicate a
requisite percentage of
funds to priority sectors and
offer ‘no frills’ accounts.
While agriculturists form a major segment, other
professionals such as artisans and people working in cottage
industries need aid as well. The urban poor are usually daily
wage earners, or those that have low-paying regular jobs
which do not offer adequate security.
According to estimates, only about 10% of Indians who
need funds to improve their economic condition have access
to it. To promote financial inclusion, public sector banks are
required by the government to dedicate a requisite
percentage of funds to priority sectors and offer ‘no frills’
accounts. Women in rural and urban areas are major
contributors to household incomes and run small scale
9
 COVER STORY

house-based enterprises such as tailoring and food-based small scale

enterprises. Efforts to drive the entire initiative through them are taking shape,
as they have proved to be prompt at repayment.

Technology has been used to gain access to consumers in remote areas, to cut
costs, make delivery faster and easier. Kiosks and smart cards are expected to
make transaction costs much lower. Some private sector banks have also
succeeded in converting micro-finance from being a socially responsible
activity to a profitable venture.

An example of this is ICICI Bank, which has been a front runner in the area
of micro-finance, pioneering innovative schemes and initiatives. It introduced
the partnership model forging an alliance with existing MFIs. The MFI, in turn,
undertakes the responsibilities of identifying and training end-customers, and
disbursing and recovering the money. ICICI Bank also launched Grameen
Capital India, a company that promotes micro-finance as an attractive ‘asset
class’ by enabling access to the capital markets and a wider canvas of investors.

India has a huge population that does not ‘officially’ fall in the category of
‘poor’ - those that earn about US$ 2 - US$ 5 per day. The specialty of this group
lies in the fact that they may be able to regularly repay small loans without any
difficulty, though collaterals may not be an option for them. No frills accounts
for households with low but regular income, would ensure their participation in
the banking system, and also encourage savings. India also has the highest
growth rate in cell phone penetration, and financial institutions must exploit
this channel to deliver banking services.

Systemic Impact

In all regions around the world, micro-finance has impacted not only the rural
and urban poor, but also a number of businesses that serve this target segment.
In addition to financial services, companies that manufacture mobile phones,
household goods (such as televisions, refrigerators, water purifiers and stoves),
consumer products (soaps, shampoos and detergents) and farm equipment
(including tractors!), have made an aggressive foray to service the rural areas.
Some companies have even created innovative products such as a refrigerator
without a compressor, and are selling it at a price point that has been arrived at
after taking market feedback from potential customers. With the number of
people under the MFIs’ umbrella increasing exponentially, these companies are
Technology has been using MFIs as a channel to distribute their products.

used to gain access to With new products entering the rural market, it has led to a high demand for
rural sales agents for these products, with many companies appointing rural
consumers in remote housewives to market products within a community for a sales commission.
This has automatically led to a higher income generation for many rural
areas, to cut costs, families, and has also helped empower women to a large extent by providing
them with an opportunity to earn income and have a sense of purpose.
make delivery faster
With the rural and urban poor having access to fairly regular income, a number
and easier. Kiosks of them who realize the value of providing education to their children, are now
willing and able to spend on it. Although the fees gained through an individual
and smart cards are student are very less, the potential numbers are very attractive from a business
point of view, especially with technology-led education gaining popularity in
expected to make villages.

transaction costs All this opens us new scenarios and ambitions for the rural and urban poor, and
results in a powerful economic and social impact within the community, village,
much lower. town and region, and finally at the country level.

10
 PERSPECTIVE

Business Agility
Through Central
Processing
Services
Kalpesh Desai
CEO, Agile Financial Technologies

Companies are being driven, now more than
ever, to do more with less. Cutting back on
services, service levels, or quality is clearly not
an option.
How, therefore, can companies increase
operational efficiencies in customer acquisition
and retention, as well as in back-office
transactions?
The current financial crisis has forced all companies,
especially in the banking, financial services and insurance
(BFSI) industries, to reassess the way they do business. With
institutional collapses becoming a common feature on the
landscape, survival is obviously the first priority of
management. However, beyond the survival imperative
(which can be managed by short term measures) resides the
real issue of sustainability.
As has been the case for the past few decades, the solution
lies in the use of technology. But the major stumbling block
is the existence of legacy systems. Almost all technology
applications started life completely in-house - they were
designed, developed, and maintained by the company’s own
staff, and deployed on the company’s own infrastructure. As
hardware and software technology advanced rapidly, and as
business needs evolved alongside, these in-house
organizations adapted as best as they could in order to offer
the latest technology to their users. Employees were trained
to help them develop new skill sets. New features were
stitched on to existing applications, but they were not fully
integrated. New equipment was added, but this was not
always compatible with existing hardware, and resulted in
silo-ed information. To put it all together, integration was
performed by way of data files and massive nightly batch
runs.

Technology in the BFSI segment has come a long way from

the days of the traditional management information
systems, but many companies still find themselves working
with an unwieldy mix of the outdated and the state-of-the-
art. Additionally, changes in government regulations in

11

geographies where the company operates, calls for
modifications to the underlying applications. A further
complication is seasonal demand, which means that
capacities and staff levels must be maintained to cater to
peak loads. For in-house IT, this creates a large and
expensive internal organization.
While being a problem, this also offers a tremendous
opportunity to reduce cost. Enter the Centralized
Processing Centre (CPC). A CPC is either formed by very
large companies for processing their internal requirements
from a centralized location, or increasingly today by service
providers who have set up centres with capabilities in diverse
segments.
The outsourcing industry today is at a maturity level where
it can completely take over, and at times run more efficiently,
almost all technology related non-core operations of any
business. For many segments, especially BFSI, outsourcing
suppliers can provide robust platforms and support for core
functions.
CPCs, especially when outsourced to independent service
providers, can facilitate innovation and greater productivity
in all facets of technology as a driver of business, including
design of the business model, deployment of the
appropriate technology, scale and agility, accessibility and
security, integration and cost.
Business Model Design
The emergence and ubiquity of every new technology
(internet, mobile) opens up avenues for creativity by the user
community. Most innovative products and services being
offered to BFSI customers today are made possible by the
availability of technology, to the extent that management
can now take an ‘anything is possible’ customer-centric
approach while designing their business model. The
responsibility of executing the business process is
undertaken by the service provider.
Process Optimization
Moving transaction processing to a central processing centre
can create an opportunity for the financial institution to
review their existing processes, and engage in process
optimization. With the deployment of effective workflow
management tools, it is now possible to replicate the same
function carried out in the back-office with lower skilled
personnel who need to follow a defined task list in the
process workflow. The replacement cost of the above itself
generates a visible, definable ROI, and simultaneously
enables bankers to focus on the front office, customer
experience, product development and risk management.
Deployment of Appropriate Technology
Keeping up with technology is essential to remain
12
PERSPECTIVE
competitive, but can be prohibitively expensive. Most
organizations can afford to upgrade their core internal
systems only every five to ten years. In effect they are unable
to reap the benefits of new technology until their next
upgrade cycle. Added to this is the cost of retraining staff
for every set of skills required for all applications, whenever
the upgrades are implemented. In contrast, supplier-run
CPCs continuously invest in technology, people and
processes, as this is a core business function for them. They
are thus able to take advantage of technology improvements
very quickly, and pass on the benefits to their customers.
Scale and Agility
Supplier-run CPCs are typically highly scalable, as they offer
similar services to many companies, and therefore have a
large installed capacity for any application or process.
Consequently, they are able to respond immediately to a
sudden rise in volumes from any customer, without any
increase in per transaction costs. By the same token, when
the demand ends, they are able to re-deploy staff without
any carrying or retention cost to the customer. In terms of
adoption, CPCs are able to acquire new technology and get
it working faster than an internal IT department. Similarly,
they are able to develop and deploy applications rapidly,
offering the customer a much faster time-to-market.
Accessibility and Security
In order to offer a superior client experience, companies
need to offer their clients access to services not only via
human interaction (typically during business hours) but also
via the Internet and mobile. Third party suppliers are the
leading providers of such access mechanisms. Beyond
access, security of client information is the top priority for
companies operating in the BFSI industry. Here again,
service providers are better equipped to ensure technical
security of client data. As service providers, they are
required to operate at the highest levels of compliance in
order to at least meet or exceed the levels practiced by their
customer companies.
Integration
Cross-selling products and services has become a critical
success factor in the financial services industry. However,
while multiple services under the same roof may win
customers over initially, unified management and reporting
mechanisms are essential to retain them. For example, in
addition to retail banking, a bank may want to offer mutual
funds, portfolio management, and unit linked insurance
plans to the same customer, with a seamless automatic flow
of funds from one service to another as and when needed,
as well as a common record of all static information related
to that customer.
Additionally, if all these include a reporting/reminder
service either by direct mail, email, mobile or telephone,
 PERSPECTIVE

such messages too can be integrated into a single communication. Regulatory

compliance is also tightening continuously, and satisfactory compliance also
demands extensively integrated systems.

Cost

The most significant cost advantage when using a CPC is in not having to
invest in infrastructure or staff. While the pay-per-use model may come at a
small premium, the cost of obsolescence is zero. And in cases where multiple
services (like IT and BPO) are outsourced to the same supplier, overall costs
are lowered by a reduction in the total number of transactions. In addition, the
usage of CPCs significantly enables business processes to become streamlined,
and thus provides companies with a strategic advantage that goes beyond cost
efficiency.

An Alternative: Cloud Computing

CPCs managed by external service providers do, however, have some entry
criteria. They require a certain minimum level of operational discipline and
record keeping on the part of the customer. More importantly, there is a set-
up time and effort involved, and the model is based on economies of scale,
which means that benefits accrue only beyond a threshold transaction volume.
For companies whose operations are not large enough, there is a viable
alternative - cloud computing - which offers most of the benefits of CPCs, but
calls for some self service. Specifically, no capital investment is required for
either hardware or software, and therefore technical staff too.

While this does require permanent functional staff, they need to be trained only
once on how to use the software-as-a-service (SaaS) applications, with
subsequent technological advances automatically incorporated into the
software by the SaaS provider.

Conclusion

The concept of central processing, whether via service provider-run CPCs or

cloud computing, has significantly changed the way companies are able to
service their customers.

First, it enables businesses to adopt and leverage technology which may have
been prohibitive otherwise. By outsourcing technology as well as routine
business processes, the company is able to focus on its core business
competencies. Kalpesh Desai, founder and
CEO of Agile Financial
Second, it substantially reduces the time required to implement and roll out Technologies, envisioned the
new innovative applications. The reliability of the software too is far greater creation of an unparalleled
than an individual company may be able to achieve on its own.
enterprise that would be a
Third, it enables complete seamless integration across all relevant applications, technology partner to leading
offering the company’s clients a unified view of all the information of interest players in the BFSI sector
to them, while minimizing the number of separate transactions needed to be enabling business agility. He
performed by the client. Such integration also enables personalization of
services to an individual customer’s needs, in turn helping to attract new has over two decades of
customers, and retain existing ones. experience in spearheading
technology companies to
Finally, and probably most importantly, it allows a company to achieve greater achieve and sustain a position
security and regulatory compliance. By spreading the cost across all customers,
suppliers are able to provide fully customizable levels of security, integrity, and of market leadership and
compliance at a wide range of comparatively low price points. organic growth.

13

Dubai Financial Market Records a Net Profit of
AED 128.3 million
Dubai Financial Market has announced its financial results
for the second quarter, disclosing a net profit of AED 128.3
million, compared to AED 58.5 million in the previous
quarter, representing a growth of 119%. The quantum jump
in net profits in the second quarter is a reflection of the
increase in market activity as the total trade value jumped
113% to AED 58.8 billion compared to AED 27.6 billion in
Q1 2009.
According to Essa Kazim, Executive Chairman of Dubai
Financial Market, "The market witnessed good performance
during the second quarter of 2009, with significant increase
in different market indicators such as trading volumes and
values, the performance of listed securities and the DFM
general index. The market performance in Q2 2009 reflects
improved investor appetite and their confidence in the
sound fundamentals of the national economy and publicly
listed joint stock companies. We are optimistic about the
outlook, and hopefully the market can acquire additional
momentum to be able to record more positive results by
year end".
National Bank of Kuwait buys 13.2% in
Boubyan for US$ 295 million
National Bank of Kuwait, the country’s biggest bank by
assets, has bought 13.2% of the Kuwait Investment
Authority’s stake in Boubyan Bank for US$ 295 million at a
public auction. This takes the National Bank of Kuwait’s
14
NEWS
Global
Update
A quick review of industry news from
around the world.
stake in Boubyan to a total of 27.5% or 321 million shares.
It is believed that National Bank of Kuwait had earlier tried
to buy a 19.2 percent stake in Boubyan from Commercial
Bank of Kuwait (CBK) but the sale was disputed by
Investment Dar.
Qatar National Bank Sweetens Terms for
Banking Accounts
Qatar National Bank has announced that customers holding
current and savings accounts with the bank will no longer
have to maintain a minimum balance. However, they will
continue to receive the same benefits as usual, which means
that account holders will be able to earn credit for all funds
maintained on deposit, qualifying for special promotions
and receiving preferential service rates wherever applicable.
The bank also announced it plans to decrease tariffs on a
number of its banking products and services, including
safety deposit box rental, cheque books, personalized debit
card replacements and certain inward money transfers.
Government of Qatar Purchases Banks’
Property Investments
With banks in Qatar struggling with their exposure to real
estate deals, the central bank has announced that the
government has earmarked QAR 15 billion (approximately
US$ 14 billion) to buy real estate portfolios held by banks.
The government had earlier announced that it would offer
to buy banks’ property portfolios and loans to support the
banking sector which was suffering and also guarantee
continued growth in the economy.
 NEWS
"The programme has been implemented, funds have been
allocated to eligible banks and payments have been made
according to conditions," said Sheikh Abdullah Bin Saud Al
Thani, according to Qatar News Agency.
Actis Buys 9.3% in Egypt’s Comml Int’l Bank for
US$ 244 million
Actis, a private equity firm, has agreed to pay US$ 244
million for a 9.3 percent stake in Commercial International
Bank, Egypt’s largest bank by market value. Justifying its
investment, Actis, which invests in emerging markets, has
said that Commercial International Bank has excellent
growth potential. The investment has been welcomed by the
bank, which says that the investment will help accelerate its
growth in consumer banking.
Doha Bank Announces 24% Increase in
Operating Profit
Doha Bank’s financial results for the first half of 2009 were
announced by His Excellency Sheikh Fahad Bin Mohammad
Bin Jabor Al Thani, Chairman of Board of Directors. The
bank’s net profit for the first half of 2009 increased by 12
per cent to QAR 646 million, compared to QAR 579 million
for the corresponding period last year.
The bank also recorded substantial growth in net income
and total assets. Incidentally, the bank has been pushing the
concept of ‘Green Banking’ to encourage each customer to
protect the environment by adopting paper-less banking.
Doha Bank has also been voted as the "Best Commercial
Bank in the Middle East" recently.
ANZ Looking to Acquire Bank Assets in Asia
Melbourne-based ANZ may buy Royal Bank of Scotland
(RBS) units in at least five Asian countries, and is believed to
be in advanced negotiations to acquire RBS’s retail and
commercial-banking units in Hong Kong, Taiwan,
Singapore, Vietnam and Indonesia. The growing number of
bad loans in Australia has had an adverse impact on ANZ,
which has cut its dividend this year. ANZ sold A$ 2.5 billion
worth of shares two months back to fund the bid. It also
paid A$ 114 million to increase its stake in Indonesia’s PT
Bank Panin, and plans to open six new offices in Vietnam.
Japan’s Tokio Marine to Cut Hedge-Fund
Investments
Tokio Marine Holdings, which is Japan’s biggest casualty
insurer, plans to reduce hedge-fund investments and shift
more of its portfolio in the industry to strategies such as
macro and long-short equity funds. In order to minimize
fees and increase profit, Tokio Marine will stay focused on
single hedge funds, rather than fund of hedge funds. Tokio
Marine currently invests in around 60 hedge funds, more
than half of which are based in the US and Europe.
European Union Warns State-Aided Banks of
Possible Forced Sales
Banks that received government bailouts, such as Lloyds
Banking Group and Dexia SA, may have to sell branches or
units to gain approval for restructuring plans under new EU
guidelines. The EU announced that its recommendations
call for stress tests, disclosure of impaired assets and a
review and possible closure of unprofitable operations.
The guidelines will be used to review lenders that received
aid after the credit crisis prompted EU governments to
approve more than 3.77 trillion euros to support banks.
Central Bank of Brazil Slashes Benchmark
Interest Rate
The Central Bank of Brazil has slashed the benchmark
interest rate for the fifth time this year to 8.75%. Central
bank President Henrique Meirelles had cut the rate by at
least a full point in all four previous policy meetings of 2009,
and the latest cut signals the possible return of economic
growth in the region.
According to the Organization for Economic Cooperation
and Development, the Brazilian economy is expected to
expand 4% next year, powered by domestic demand.
According to the IPCA index, the annual inflation has
slowed to 4.8 percent in June, down from 5.2 percent in May
and the lowest since March 2008.
Economic Growth Slows in Sudan
According to the International Monetary Fund (IMF),
Sudan’s economic growth will slow to 4 percent this year
from almost 7 percent in 2008 because of lower revenue
from oil exports. Foreign reserves have dropped to about
US$ 300 million this year from US$ 2 billion last year, due to
lower oil prices and the central bank’s intervention to boost
the value of the local currency.
Although Sudan does not qualify for funds from multilateral
lenders such as the IMF and World Bank due to US
sanctions, China and India are expected to provide loans to
build the infrastructure in Sudan.
Bank of Yokohama Plans Expansion
Bank of Yokohama, Japan’s largest regional bank, has
announced plans to surpass Nomura Holdings to become
the biggest retail brokerage in Kanagawa in terms of assets
under management. With demand for loans going down last
year, Bank of Yokohama established a joint venture with
Tokai Tokyo Financial Holdings to expand into the
securities businesses and increase fee income. The securities
venture which started with 7 branches in Kanagawa, plans to
have 22 outlets within four years, most of them contained
with Bank of Yokohama branches.
15

Micro-finance is an area which is arguably the
most dependent on technology in order to be
effective in terms of provision of services to its
target audience, and in a cost effective and
operationally efficient manner.
It is also an area where sustainability and
outreach are both extremely important, i.e. if
either of these qualities is compromised, it
would have a negative effect on all initiatives
and as a result, on the country’s economy.
16
SOLUTION SPOTLIGHT
Agilis UMFS
Technology for Micro-finance
The need of the hour is to enable delivery of services such
as credit, pensions and insurance quickly and efficiently, thus
ensuring sustainability of programmes. And such
sustainability efforts have to be cost effective to ensure
outreach to new communities, villages and regions,
otherwise micro-finance institutions (MFI) will not achieve
their mission of reaching out to vast multitudes of people.
In addition, the technology that is used has to be transparent
to the end-customers, so that it builds a high level of
confidence in them and encourages them to switch over
from the local unorganized sources of money, to a
professional micro-finance institution. While the
sustainability v/s outreach challenge still exists when it
comes to reaching out to people in remote areas, or to
people with low economic and social status, technology is
continuously evolving, and is today available to circumvent
and/or address these challenges and enable MFIs to further
their positive impact on society.
Agilis Universal Micro-finance Solution (UMFS) is a user-
friendly and web-based financial platform designed to
service the end-to-end needs of an MFI including
group/individual customer information management, shares
and savings management, loans and deposits, transaction
processing and financial accounting. The solution, which is
CGAP-compliant, is built on a component-based
architecture which gives MFIs the flexibility to change
dynamically with changing requirements.
The workflow-based portfolio management system allows
MFIs to manage the complete cycle of solidarity group and
 SOLUTION SPOTLIGHT
individual lending portfolios from origination and
disbursement to collection and recovery.
The core transaction processing module handles the data
capture of all debit and credit transactions and automatically
maintains general ledger entries based on user-defined
parameters. The integrated report generator produces
standard operational reports as well as statutory reports. The
solution’s intuitive front-end is integrated online to mobile
and handheld devices such as smart card readers, which
makes it a powerful solution for use in geographically
dispersed and remote field operations.
The features of Agilis UMFS include:
Customer Information Management
Agilis UMFS captures exhaustive information about group/
individual customers such as personal details, demographic
information, financial status, assets and collaterals. MFIs can
gain a single view of the customer across multiple accounts.
Shares Management
There is a built-in share management module to define
different types of shares which group/ individual customers
of credit cooperative MFIs can buy, sell and transfer by cash,
cheque or bank transfer. All share transactions are
automatically updated in the general ledger.
Savings and Deposits
Agilis UMFS offers the ability to create and manage savings
and deposit products with incredible flexibility. Accounts
can be created in the name of an individual with or without
a co-account holder, a group or a business/institution.
Group accounts can be tracked either at group level or at
individual member levels, wherein the debit and credit
transactions of both group and individual members of the
group are captured. Interest rates can be configured
according to running balances, monthly minimum balances,
average period balances, and end-of-period balances.
Savings and deposit accounts can be linked to loan accounts
so that they can function as a guarantee and automatic
repayment of loan arrears can be made from the account.
The savings and deposit account transactions are
automatically posted in the general ledger with provision to
de-activate automatic posting which will facilitate MFIs that
handle loans only, but still want to track their clients’ savings
with a local bank. Minimum opening balances or balances to
be maintained can be set for each type of account. Apart
from transactions and interest postings, the savings module
also allows the addition of rewards or charges to accounts.
Loan Portfolio Management
Agilis UMFS has been designed to process different types of
loans such as personal loans, housing loans and small
business loans. Each loan product can be configured with its
corresponding interest parameters and installment periods.
Loan products can also be classified according to source of
fund, loan officer and business sector; this facilitates MFIs
in effective portfolio management. The workflow-based
loan processing engine controls and manages various work
steps of loan processing right from initiation till the sanction
order is approved. On approval of loans, the system
automatically generates a loan contract with repayment
schedules.
The solution supports part and full disbursements with
facilities to deduct fees and charges. Disbursements can be
made either in cash, by cheque, or to an existing bank
account. The system supports multi-channel (e-mail, fax and
mobile text messages) correspondence such as proactive
reminder notifications and arrears notification on
irregularities.
Agilis UMFS classifies non-performing loans into three
buckets i.e. sub-standard, doubtful and lost. It calculates
17
 SOLUTION SPOTLIGHT

precise provisions automatically by applying regulatory norms and is highly

parameterized so that changes in regulation can be configured with ease. The
solution also enables users to set up signals and alerts for delinquencies; based
on which the branch managers can initiate follow up action with the customers.
The recovery module captures all the details of the delinquent accounts and its
status of recovery to facilitate branch managers to initiate action on re-
scheduling, closure and write-off.

Reporting Engine

The reporting engine is designed to provide the MFIs with information for
operational control, management control and strategic planning, and provides
the following reports:

Savings

Loan Activity

Portfolio Quality

Income statement

Balance sheet

Cash-flow

Mobile Branch in Field Operations

The mobile branch is used by loan officers to capture transactions in the field.
Smart cards are used as access cards by individual customer and groups.
Transaction details are updated in the smart card for effective control. Activities
performed using the hand-held device include:

Savings, repayments and past-due payments.

Group and individual validation and smart card updation

Issue of spot receipts

Auto generation of repayment fund transfer.

Smart Switch

The smart switch serves as an intermediate router/network switch for

integrating the Mobile Branch hand-held devices with Agilis UMFS through a
The solution’s dedicated link for secure money transactions. Data integration takes place either
on-line through GPRS or off-line through serial/USB port connectivity. The
intuitive front-end is features of Smart Switch include:

integrated online to
Dynamic Routing and effective Network Traffic Management

Secure Message Transfer Using Industrial standard message formats.
mobile and handheld
Protocols to handle integration of (wireless) handheld devices and MFI’s
database controller.
devices such as smart
ISO 8583 message digest for increased scalability

Triple DES encryption algorithm for secure message transmission of PIN.
card readers, which
AES encryption algorithm for ISO message transfer.

Audit logs for overall management of message transfer.
makes it a powerful
Financial Accounting
solution for use in
The financial accounting module automatically maintains general ledger entries
geographically based on user-defined parameters. All savings, deposit and loan products are
linked to the corresponding general ledger accounts. Branch codes, donor
dispersed and remote codes and cost centers serve as analytical codes for MIS reporting. The fund
accounting module facilitates MFIs in efficient reporting on fund usage to
field operations. donors.

18
 www.agile-ft.com

Agile Financial Technologies Pvt Ltd Agile Financial Technologies Agile Financial Technologies Pte Ltd
701-A, Prism Towers 808-A, Business Central Towers 20 Cecil Street, #14-01
Mindspace, Malad (West) TECOM, Dubai Internet City Equity Plaza
Mumbai 400064 P.O. Box 503007 Singapore 049705
India Dubai Tel: +65-64388887
Tel : +91-22-42501200 United Arab Emirates Fax: +65-64382436
Fax: +91-22-42501234 Tel: +971-4-4331825
Fax: +971-4-435-5709

Views expressed in this publication do not necessarily represent the views of Agile FT and the information contained herein is only a brief synopsis of the issues discussed herein. Agile FT makes
no representation as regards the accuracy and completeness of the information contained herein and the same should not be construed as legal, business or technology advice. Agile FT, the authors and
publishers, shall not be responsible for any loss or damage caused to any person on account of errors or omissions.